The cryptocurrency market has historically been dominated by retail investors, with professional investors following. Is this changing?

In the fourth quarter of 2017, the advantages led by retail investors were very obvious. At the same time as media hype, prices also soared. There is no doubt that retail investors are quieter this time around. In the first half of the fourth quarter of 2017, CNBC had nearly 100"bitcoin"headlines. Over the past six weeks, there have been fewer than 40 headlines for Bitcoin as its market capitalization raced toward new all-time highs.

It is too early to draw conclusions on the consistent trend of crypto investing, mainly because of the simplistic nature of the retail/institutional dichotomy. Below, the four dimensions of the market will be used to explain how the behavior of participants in this rise is different from that of investors in 2017.

Bitcoin whales, trading vs. holding

From the end of 2013 until the crash of 2018, the number of addresses holding at least 1 bitcoin has been increasing. That number picked up again in 2019 before leveling off again this spring. This is a departure from late 2017, when the number of such addresses surged to new highs along with the bitcoin price.

we can call it bitcoin"billionaire"A person usually refers to a person who holds at least 1000 BTC. These giant whales sold until the end of 2017. This time, the list of big Bitcoin players is growing, not shrinking.

Address balances must be treated with caution; the number of addresses ≠ the number of entities. Behavior is a better signal. This yellow "coin" accumulates more in buy-and-hold wallets and less in wallets that have shown a tendency to trade.

On two occasions since 2017, a slowdown in hoarding by Bitcoin holders has been an important indicator of market tops. In 2020, there are no signs of slowing down.

Bitcoin vs. Ethereum and Other Coins

The bull run of 2017 is as far back as people can remember as a phenomenon driven by the frenzy over ICOs on Ethereum. However, by the time the frenzy was overdone, ETH was largely past its prime. In the middle of the fourth quarter of 2017, Bitcoin returned 23.9%; ETH returned 6.9%. It was Bitcoin’s fourth-quarter rally that kept the bull market going.

Compare 2020, and the similarities and differences are evident. Also ethereum led the way, but this time it kept pace with bitcoin, returning 23.2% so far in the fourth quarter and even breaching $500 earlier on Friday, while bitcoin returned 28.4%. If the pattern of 2017 repeats itself, the Bitcoin bull market may have much longer to go.

So, are the crypto markets consolidating? The answer is yes and no. Bitcoin dominance, or cumulative market cap share, is above 50%. Typically, this means a shorter list of assets that make up the bulk of the market. Not so this year.

The top five assets in the CoinDesk 20 are growing along with Bitcoin, but the long-tail assets are now more dispersed than they were after the 2017 bubble (this statistic includes stablecoins and other pegged assets).

Regulated Futures Market vs. Offshore Futures Market

"The agency is here"The incessant growth in the CME bitcoin futures market can be seen, indicating a growing demand for regulated exposure to bitcoin through established operational channels. This week, CME's holdings hit a record high of $1 billion.

However, much of this growth can be attributed to Bitcoin’s price changes. In volume terms, the CME is dwarfed by lightly regulated derivatives contracts traded by individuals, professionals and liquidity providers. It would be unwise to use CME growth alone as an argument for institutional turnaround. Rather, institutional participation has grown along with the rest of the market.

North American Investors vs. East Asian Investors

Simultaneously with the growth of CME futures is the flow of bitcoin to North American exchanges and outflows to East Asian exchanges.

To the extent that exchange liquidity represents participant activity, East Asian investors are selling Bitcoin at an unprecedented rate. Meanwhile, North American investors are showing greater interest in Bitcoin than in 2017.

epilogue

epilogue

It’s true that this bull market is different than 2017, but that doesn’t mean we won’t see another cycle of ups and downs. Signals from the types of investors who are implying participation suggest that we may be in a cycle earlier than when Bitcoin hit its all-time high three years ago. The history of Bitcoin is filled with talk of upcoming shifts or regulatory changes that would fundamentally alter the market. These claims have been exaggerated in the past and may be exaggerated now.

Are traditional financial markets digging their own roots? Maybe, but that doesn't suddenly turn Bitcoin into a safe haven. The current pattern of increasing participation from new, larger, and longer-term investors is likely to continue, but Bitcoin and other cryptocurrencies will be risky investments for the foreseeable future, and investors should continue to invest in They count as such investments.